Building Asset Value In Trademarks and Copyrights

Presented by

Alec P. Rosenberg

Arent Fox LLP

Washington, DC | New York, NY | Los Angeles

Part I:

Developing Rights

Definitions – Trademarks

• Trademark/Service Mark: word, name, symbol or device used to identify and distinguish the goods or services of a business from those offered by others

• Trade dress: a distinctive, nonfunctional feature of a label, package, advertisement, web site or other object that identifies and distinguishes goods or services

• Certification Mark: a word, name, symbol or device used by a person other than its owner to certify regional or other origin, material, mode of manufacture quality, accuracy, or other characteristics of such person’s goods or services

• Collective Mark: a trademark or service mark used by members of a cooperative, association, or other group or organization including marks indicating membership

Definitions – Copyrights

• Copyright: A bundle of exclusive rights granted by government for a limited time to protect an original, “fixed” expression of an idea.

• Examples of Copyrightable Subject Matter: Literary and Musical Works Movies and other Audio-Visual Works Factual Compilations Software Translations Paintings Photographs Architectural designs

Developing Trademark Rights

• Use in Commerce = Common Law Rights

• Benefits of Federal Registration

Constructive Notice

Rebuttable Presumption of Validity, Ownership and Exclusive Right to Use

Federal Jurisdiction and enhanced relief available

Incontestability After 5 Years

Nationwide and International Priority

• Registration may be based on Actual or Intended Use

• Process

Selection

Search and Clearance

Use / Registration

Proper Use and Licensing

Monitoring and Enforcement

Developing Copyright Rights

• Rights Accrue Upon Creation and Fixation of “Original Works of Authorship” Only Minimal Creativity Required

Selection and Arrangement of Facts, Not Facts Themselves

• Author = Owner Works Made for Hire

Joint Works

• Benefits of Registration Constructive Notice

Federal Jurisdiction

Potential for Evidentiary Benefits and Enhanced Damages

Part II:

Strengthening and Protecting Rights

Maximizing the Value of Trademarks

• Pick Strong, Distinctive Marks

• The Strength of a Mark and Scope of Protection Available is Affected By The Degree of Inherent Distinctiveness

• Spectrum of Inherent Distinctiveness

Coined

Arbitrary

Suggestive

Descriptive

Generic

• Acquired Distinctiveness (aka “Secondary Meaning”)

Examples of Coined Marks

• Kodak

• Exxon

• Verizon

Examples of Arbitrary Marks

• Apple

• Camel

• Saturn

Examples of Suggestive Marks

• Wrangler

• Coppertone

• Sparkle (for glass cleaner)

• Samson (for hair care products)

KEY: Some Imagination Required

Examples of Descriptive Marks

• Steak N Brew

• Raisin Bran

• Bank of America

• Bufferin

• The Dollar Store

KEY: Identify, Describe, Characterize a Quality, Attribute, Ingredient, etc.

Proper Trademark Usage

• Trademark Rights May Be Lost Through Improper Use

Use Trademarks as Proper Adjectives Avoid the Possessive or Plural Form

Display Marks in a Distinctive Manner

Display a TM, SM, or ® Symbol with Marks

Display Marks in a Consistent Format

Never Permit Unauthorized Use of Marks

Strategies for Enhancing Trademark Value

• Monitoring

• Enforcement

• Licensing (Quality Control is Critical)

• Family of Marks Doctrine

• U.S. and Int’l Trademark Registration

Strategies for Enhancing Copyright Value

• Exploit Range of Copyrightable Subject Matter

• Proper Content Clearance

• Register Important Works Made for Hire

• Careful Licensing (Exclusive License = Assignment)

• Consider Registering Websites (and Updating Regularly)

Websites and Domain Names

• Domain Name Selection Consider Seeking Trademark Protection Consider Defensive Registration

• Enforcement Techniques Domain Names: UDRP vs. ACPA Copyrights: Notice and Takedown (DMCA)

• Key Words and Pop-Ups

• Website Content and Programming (i.e., hyperlinks)

• Content Clearance and Copyright Registration

Part III:

Using Trademarks and Copyrights to Obtain Financing

• Relatively Recent Phenomenon

• Exploits Fullest Economic Potential of IP

• Blend of State Law / UCC and Federal Law

• Careful Due Diligence is Critical

Trademarks and Copyrights As Security For Financing

18

Valuation of Trademarks and Copyrights

• Context is Key Mergers / Acquisitions Bankruptcy / Reorganization Inter-company Transfers Litigation / Damages Tax Licensing Loan Securitization

• Important Overlapping Concepts Goodwill (image / reputation, probability of continuing patronage,

intangibles giving going concern advantage over start-up)

Intangible Assets (precisely identifiable, legally owned, traceable, provable, and quantifiable)

Intellectual Property (trademarks, patents, copyrights, trade secrets, software, domain / web assets)

Valuation Methodologies

• Cost Approach Historical or Replacement Cost “Substitution, not “Earnings” Value ” = Generally a Low Value Best Suited to Very Young, Experimental Assets

• Market Approach Compares Actual Market Transactions Requires Accessible, Reliable Data concerning Similar Assets

• Income Approach Considers Reasonable Future Income Stream (DCF Analysis) Challenge is Separating IP Income Stream from Business as a

Whole Requires Multiple Predictions / Estimates

• Relief From Royalty Approach Subset of “Income Approach” – Measures NPV of Royalties

Company Saves Through Ownership of IP Combinations of Real World Info (i.e., Royalty Rate) and

Predictions (i.e., Future Income Streams)

Considerations When Valuing Trademarks

• Only Government-Sponsored Monopoly That Is Endlessly Renewable

• Mark May Be the Brand, So Value of Mark = Value of Brand

• Trademarks Cannot Travel Alone – They Require Associated Goodwill

• What Are You Valuing? (Mark / Brand Only, or also All Related Assets)

• KEYS: Is it really a trademark, and does it work? Would others want to use it to distinguish their goods / services? Would someone pay for a license to do so?

Considerations When Valuing Copyrights

• Long Term of Protection Generally: Life + 70

Works Made For Hire: 95 from Publication or 120 From Creation

• Keys Consider Specific Work In Question

Consider Current Value Based on (a) Licensing and (b) Internal Use / Benefits

Consider Potential New Future Uses

Security Interests in Trademarks / Copyrights

• Careful, Thorough Due Diligence Check Licenses: Can Only Pledge What is Owned Check USPTO and Copyright Office / International?

• Trademarks Rule Against Assignments-In-Gross

Best Practice is to Make Dual Filings (State and USPTO)

Intent-To-Use Applications = Pledge vs. Assignment

• Copyrights Federal Law Preempts, But Dual Filings Recommended

Unregistered Copyrights

• A Note About Domain Names Property vs. Conditional Contractual Right

Alec P. RosenbergPH: 202-715-8552rosenberg.alec@arentfox.com

Arent Fox PLLC1050 Connecticut Ave., N.W.Washington, DC 20036

Contact Information: