Trademarking

Trademarking

 

A trade mark is a way of identifying a unique product or service. Sometimes referred to as a brand, it can help your customers discern the quality of your product or service over that of your competitors.

A trade mark is not just ‘a logo’. It can be a letter, number, word, phrase, sound, smell, shape, logo, picture, movement, aspect of packaging, or a combination of these.

Purpose of registering a trade mark

A registered trade mark provides you with exclusive rights to use, license and sell the mark. It’s also a valuable marketing tool because the value of your trade mark increases with the success of your business.

A trade mark is not a business name, company name or domain name

A common misconception is that a trade mark is the same thing as a business name, company name or domain name. It’s not.

Business names and company names are registered with the Australian Securities and Investments Commission (ASIC). While they’re required to run a business in Australia, they don’t stop others from using the same or similar name.

Trade marks are issued to give you the exclusive rights to that mark, which allows you to take legal action to prevent others from using it.

Domain names are issued by private internet companies and registered by the .au Domain Administration. The purpose of a domain name is to secure the web URL only.

Avoiding a costly mistake

Founded by Bec Derrington in order to connect journalists with potential sources, Australian business SourceBottle is a good example of this common misconception. She explained: 'When I first started I thought registering my domain name would be enough, but I soon realised that would not protect me if someone else wanted to use the same name. All I'd done was secured the web URL. This meant I needed to register the trade mark for my business, SourceBottle®. I used a trade mark attorney to manage the process, who was able to determine the right classes under which to register the mark.'

Soon after Derrington launched the business nationally she decided to expand globally. But she soon discovered that a martial arts studio owned the 'sourcebottle.com' domain name (she had sourcebottle.com.au). Thankfully, they had not sought to register the trade mark in any international markets, so she could register the trade mark internationally without any opposition. She also managed to buy the 'sourcebottle.com' domain from the studio as well.

A trade mark is not a design

Intellectual property (IP) rights for a design are different to a trade mark.

One of the key differences is that a design needs to be unique or new to be registered and a trade mark does not.

Also, a design refers specifically to the new visual features of shape, configuration, pattern or ornamentation of a product.

Examples of trade marks include:

  • the phrase/word ‘The Airpocket’
  • the flying red kangaroo on the tail of Qantas planes.

Examples of designs include:

  • the new shape of the seat on an ergonomic chair
  • The new visual features of a Breville juicer

You must use your trade mark or it can be removed for non-use

You must actively use your trade mark in the course of trade. If you don’t, it can be removed on the grounds of non-use. This is to discourage traders from registering multiple trade marks simply to stop others from using them.

Anyone may apply for removal of a trade mark due to its non-use. If your trade mark is officially opposed by someone, you can defend your trade mark's removal.

To illustrate a possible defence process by way of example, Metisc specialise in software that helps clients to register and record sports scores as well as manage competitions and fixtures. An international gaming company advised Metisc that they intended to use a similar trade mark to iScore 'because Metisc wasn't using it anymore'.

That was not true and so the Australian company briefed its lawyers.‘We still had clients using iScore. But we didn’t really have a huge problem with the gaming company using a similar name given they work in a separate area,’ Graham said.

His legal team came up with a win-win solution. ‘They had trade marked the name i-Score in the US and Canada, and we had obtained the registered trade mark in Australia. So we came up with a plan under which we would allow them to use it in Australia as long as we had reciprocal rights to it in other jurisdictions,’ he explains. It was a satisfactory solution for both parties.

Life of a trade mark

Your trade mark registration lasts for ten years from its filing date.

You can renew your trade mark registration 12 months before your renewal is due, or up to six months after. You will need to pay extra fees if you renew after the due date.

You are issued with a renewal reminder, so it is important that you advise of any address changes.

Note that matters can arise in the process of applying for a trade mark requiring you to act to protect your trade mark.

The legalities

There is no legal requirement to register a trade mark. However, if someone else has already registered the trade mark you intend to use, they can take legal action against you

If you require legal action to enforce your rights and/or deal with any parties who may oppose your trade mark registration, we recommend you seek the services of a legal professional who understands and specialises in Intellectual Property issues.

Tax treatment

Typically, expenses incurred in establishing a trade mark would be treated as capital in nature and would therefore not be deductible.  The trade mark would therefore be a capital gains tax asset and the amount paid would be added to the asset cost base.  Any legal fees or other incidental costs to establish the trade mark would also then be added to the cost base.  If you sell a business and include any applicable trade marks as part of the sale then the cost base of the trade marks will help to reduce any capital gain made on sale of business.  Alternatively, if a trade mark expires then a capital loss will likely be triggered.

Conversely, renewal fees paid in relation to an existing trade mark are likely to be treated as revenue in nature rather than capital and should be deductible accordingly in the year in which they are incurred.

Blackhole deductions under section 40-880 of the ITAA 1997 are not likely to be applicable in relation to trade mark establishment costs as these provisions cannot apply where the capital expenditure forms part of the cost base of a CGT asset.

Should you have any interest in, or questions around, trade marking, please contact us here at MBA Business Solutions and we’ll point you in the right direction.

 

Jason Beare, Managing Partner

 

 

MBA BUSINESS SOLUTIONS

Image courtesy of “Stuart Miles” of freedisgitalphotos.net

 

Licensed from the Commonwealth of Australia under a Creative Commons Attribution 4.0 International Licence.