The terms “trademark,” “brand,” and “trade name” are often used interchangeably, though they describe different things in a different context. Especially when used by people in different departments of a company, the understanding of the terms can be different.
It often happens that a company’s trademark is confused with its brand and on top of that, the brand name or trade name. A trade name is a name under which a company pursues its business and needs to be distinguished from the entity’s registered or legal name. Many countries require registering a trade name or business name in a special register. A trade name often is designated by the term “doing business as,” “trading as,” or “operating as” to make this distinction from the legal name. A company’s brand on the other hand only exists intangibly, in the minds of the public.
When used in a marketing context, the brand has two primary goals: first, to represent the company in public to create maximum awareness and recognition for the organization and its business proposition. This is done by the absolute basics: the brand name (often the trade name), the claim (which often reflects the company’s mission statement) and visually by the logo. Second, the brand is a basket that offers the promise to meet clients’ expectations for a certain quality of a product or service. For a marketer, a brand is what represents the values of a company and aims to create awareness and trust. This is created through personal contact with the client in connection with the use of services or products, contact with sales or client support, or through brand communication (marketing).
The trademark, however, is the legal means to protect the intellectual property associated with an identifier of a business. The trademark can be in the form of a symbol, logo, design, word, slogan, or combination of several elements. In some instances, even a sound, smell, or taste can be protected. Legal protection is of the utmost importance for any business because the marketing department has spent a lot of time defining and documenting the company’s unique selling proposition (USP), core values, market position, corporate identity and brand strategy. It can only be unique, though, if no market participant can copy it.
The word “brand” has its origin in the days when shepherds used to place burn marks on their livestock with a branding iron in order to differentiate it from the livestock of other shepherds. After the Industrial Revolution, goods were being sold all over the world and manufacturers recognized the need to have their products identified and differentiated from others. This led to brand names and ultimately to brands being protected by trademarks. Brands are an important part of the business landscape and their importance continues to grow with globalization. Creating brand recognition can be costly and companies are willing to spend vast amounts of money for building it up.
Compared to this, the costs for registering a trademark are negligible. A trademark is a right granted by the state and serves as a protection for the investment in a brand. It provides the owner with an exclusive right to prevent others from using its brand in an identical way, but also from creating confusion by using a mark that is similar, or simply exploiting its reputation.
A trademark distinguishes the origin of goods of one party from those of others, while a service mark is essentially the same, but distinguishes the origin of services rather than goods. The ability to distinguish goods and services from different sources is called the origin function. Other functions of trademarks include the quality function, which refers to the promise of certain positive attributes and subjective values and the communication function, which conveys the trademark image through advertising to and between consumers. Scholars and courts largely accept these concepts and the L’Oreal/Bellure case (CJEU, 18 June 2009, case C-487/07 at para. 58) is a great example.
In that case, it was said that “these functions include not only the essential function of the trademark, which is to guarantee to consumers the origin of the goods or services but also its other functions, in particular that of guaranteeing the quality of the goods or services in question and those of communication investment or advertising.” Brand functions are similar, but relate additionally to identity, image, personality, character, culture, essence, and reputation.
The creation of Intellectual Property requires a considerable investment, as does its subsequent protection. A clear value must economically justify all this. The “brand equity” in this context represents the economic value of a well-established and well-protected brand. Experience shows that recognized brands are a lot easier to sell than those that are hardly known. Brand recognition simplifies the decision-making process for potential customers as the quality promise of a brand reduces the complexity of the buying decision.
A well-established brand not only increases the effectiveness of marketing campaigns, but also enables the company to secure margins and potentially extend the brand to new services or product lines. Brand equity is a part of a company’s intangible assets, but even though it is not tangible, it represents an increasing share of a company’s value that can be monetized. Most companies are worth more than the sum of their tangible assets.
Seen through the eyes of a marketer: It’s clear that trademark and brand are closely linked and can’t be separated. A brand can be referred to as the representative elements of a company’s corporate image, which builds and develops over time by creating trust, while a trademark provides legal protection for the brand. As companies don’t want to lose the capital investment they made in creating their brand, they should utilize trademark protection. Trademarks do not need to be registered, but there are certain facilities granted to the owner of a registered trademark as opposed to the owner of an unregistered trademark who often has difficulties to prove the existence and extent of its right.
Sebastian Deck is Head of Communications, Content & Digital at the Dennemeyer Group. Dr. Richard Brunner is the Chief Legal Officer at the Dennemeyer Group.