Historically, trademarks identify goods to their makers.  And, quality trademarked goods command higher prices than comparable competitors’ products because of the better reputation. 

So, Stradivarius means the best violins, Rolex makes quality watches, Rolls Royce have the finest automobiles, Ross makes the best no sugar added chocolates and an Apple on a computer means innovative designs.  Before there can be a valuable trademark, there must be quality products.  Once a reputation is earned, an owner can demand premium prices.  To keep the pricing differential, the owner must keep producing quality products or the premium will dissipate as the perceived value of the trademark is tarnished. 

When trademark registration systems began, trademarks had to be used in commerce before they can be registered.  The first party to use a trademark had the right to register the trademark to promote products and to prevent others from using or registering that mark for those goods or services.  This is the ‘first to use’ registration system.

There is another registration system called a ‘first to file’ system.  This system is used in China.  Prior use of a trademark is no longer a pre-requisite to registration.  Priority goes to the first party to file for registration regardless of use of the mark.  A plumber walks down the street and sees a competitor using a clever trademark.  He finds out that his competitor has not apply for registration so he can go and register it himself.  If he files first, he can prevent his competitor from registering or using the mark.   Hong Kong also adopted the ‘first to file’ system on 4 April 2003.  A key difference between Hong Kong’s system and China’s is that Hong Kong retains common law trademark rights.

In a ‘first to file’ system, trademarks are business planning tool.  Registration is the most effective way to provide legal protection to the company’s brands, logos and trademarks against others from appropriating these intellectual property assets.  This should be done even before the company begins using the mark, logo or brand.  In addition to defensive benefits of registration, registration also has the positive benefit of evidencing the company’s ownership of these intellectual property assets to facilitate valuation of such rights on the balance sheet.  Having such valuation strengthens a company’s licensing or franchising program and registration is the first step a company must take.

In today’s business environment, trademarks are more than simply marketing tools.  They are still used to promote goods and services and they prevent others from riding on the company’s hard earned goodwill and reputation.  More than that, they are tools for generating revenues and they contribute to a company’s total valuation.