New Year’s Resolution: A Trademark Portfolio Audit

Many choose the beginning of the year to take stock and make changes personally and professionally. We clean out and re-organize closets, revisit and make budgets, and adopt new diet and exercise regimens. Why not do the same with your trademark portfolio?

Whether contributing directly to a company’s bottom line through royalties or licensing income, or serving as the face, identity and manifestation of good will for a company or product, trademarks are valuable assets. As with any asset, trademarks must be protected to preserve and even bolster those rights. With many competing business demands, however, it is easy to overlook all but the newest and most important marks, or marks that demand attention due to registration deadlines.

The novelty and excitement surrounding a new trademark garners attention for it and efforts to register it. And most trademark owners give at least cursory consideration to the value of a mark, often under the pressure of an imminent deadline, when a renewal or maintenance filing becomes due. But trademarks are fluid, and taking regular—perhaps annual—stock of a company’s trademark portfolio is essential for maximizing the value of current brands and avoiding fiscal waste stemming from maintaining registrations for marks that are no longer in the company’s plans, or that cover a jurisdiction or goods/services no longer relevant to the business.

With the aid of an experienced trademark professional, a trademark portfolio audit is an effective tool to ensure adequate brand protection and avoid wasteful maintenance of superfluous registrations. At a minimum, a periodic trademark portfolio audit that includes input from business and marketing representatives will foster a dialogue to keep counsel and the business on the same page regarding recent developments or imminent plans.

A typical trademark portfolio audit constitutes an assessment of marks in use, applications and registrations, and ownership of those applications and registrations. Comparing trademark use to trademark applications/registrations will identify both holes and excesses in the portfolio. Most companies have good institutional awareness of new and core brands, but lesser-known and under-publicized trademarks can fly under the radar. A thorough review of marketing and promotional materials often brings new trademarks to light and may sometimes even identify previously overlooked words, designs, trade dress, sounds, animations, etc., that have trademark significance. Marketing materials are also useful for identifying expanded use of trademarks in connection with goods and services not covered by existing registrations. Moreover, because trademark rights are territorial, the geographic scope of protection is important. A review of geographic sales data can pinpoint jurisdictions where registration is lacking, yet warranted. Conversely, geographic sales data coupled with business plans can reveal registrations that have little more than defensive value because the relevant product is not being sold there and there are no plans to do so.

Once a hole in the trademark portfolio has been identified—whether a previously unidentified trademark, or as the result of use in connection with new goods/services or geographic expansion—the next step is to consider the cost of registration compared to future plans for the product. If the product line is at the end of its lifespan, for example, perhaps trademark registration is not warranted. The rights afforded by registration will also come into play during cost-benefit analysis. For example, in a jurisdiction that acknowledges common law trademark rights, there may be less urgency to register a trademark with an uncertain future than in a jurisdiction where trademark rights are exclusively registration-based. By contrast, gaps in coverage may merit immediate attention in jurisdictions where counterfeiting is rampant. Similar considerations come into play when addressing registrations that exceed the geographic scope of use of the trademark.

Comparing the scope of use of a trademark to the scope of registration of a trademark also provides a good opportunity to consider whether a trademark is being used properly. Does the trademark owner use proper notice symbols with the mark (TM for an unregistered trademark, SM for an unregistered services mark, and ® for a registered mark)? Do the trademarks appear on the product, product packaging or instruction manuals shipped with the goods? Do service marks appear in advertising or on materials used when providing the service? Although jurisdictions differ on the basis for trademark rights, where rights are largely use-based, proper use may be essential to insulate against challenge for abandonment and/or a trademark becoming a generic term for the goods.

Another valuable opportunity presented by a trademark audit is to assess use of the trademarks and similar trademarks by others. Even when covered by a registration, trademark rights in most jurisdictions are not absolute or static. Failing to police improper or unauthorized use of identical or infringing marks can result in the dilution, circumscription and even termination of trademark rights. On the other hand, actively policing one’s trademark rights can strengthen trademarks and increase value. While auditing the portfolio, consider action against new misuse and infringement of a trademark, as well as investigate the activity of prior infringers to check for compliance with any demands or settlement agreement terms. Consider also the benefits of engaging a watch service, or if a watch service is already engaged, review the list of trademarks and sources (e.g., application, domain name, social media, etc.) watched for any necessary revisions.

Another important component of the trademark audit is reviewing the chain of title. Day-to-day, the wrong party being listed as the owner of a registration may not seem particularly perilous. When asserting trademark rights, or licensing or assigning trademarks, however, having a good, complete chain of title is crucial. Ferreting out any shortcomings with the chain of title during a trademark audit gives the trademark owner the ability to timely address any issues before they inopportunely jeopardize a commercial or enforcement opportunity. Chain of title issues can relate to the actual owners listed as well as security interests. Accordingly, trademark auditors should be cognizant of both.

Trademark rights are business assets and, just like physical assets, conducting regular audits will maintain the value and well-being of those rights. Regular audits promote cost effective trademark protection and afford trademark owners the opportunity to address any shortcomings timely and on the trademark owner’s preferred schedule, rather than having to take emergency action when the deficiency comes to light at an inopportune time when the company is otherwise poised to exploit its trademark rights.

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