Episode Transcript
[00:00:15] Speaker A: Welcome to Frankly Speaking, where we aim to solve any business owner problem anytime, anywhere, before it happens. I'm your host, Alan Franks, and today I'm going to connect a dot most people miss. Your brand isn't just marketing. It's an asset that can either compound value or quietly leak it. If you're building a business, growing family, an enterprise, or preparing for an exit someday, protecting the name on the door is a financial decision. My guest today is Zach Eiser, partner at Aspire Law, an attorney known for helping clients protect and grow their most valuable brand assets through trademark strategy, enforcement and business savvy counsel. Today, what we're going to be talking about is IP as enterprise value, risk and valuations and how it drags on them and brand confusion as a hidden tax on growth. Then I'll use Zach and we'll talk to Zach here to translate legal concepts into everyday nomenclature that we can all understand and that you as a founder can act on.
So to kick us off personally, Zach, I know we know each other here, but what's the real story of how you got into brand protection work and what do you love about it when you and your company are at your best?
[00:01:24] Speaker B: Hey, Alan, good to see you. You know, I, I got into this kind of the way most people get into law generally is they were the place that was hiring and I was very lucky. You know, I went to law school the way a lot of people end up going to law school because they think that is a good next step when they don't get invited to go work at Bain and become millionaires. As you know, that was what I'd always wanted to do. And then when the financial crisis happened, we needed to go hide out in law school and that's what happened. And was fortunate enough to get down to Emory and survive that and found a job at a law firm, a big firm here in town that was one of the foremost trademark and copyright and IP generally law firms in the world and didn't know that nobody does when you get your first job out of law school and was invited to join their team and just got incredibly lucky and started building a set of knowledge there, bounced to another large firm and was able to learn under perhaps in my view, the most talented trademark practitioner in for sure the country and likely the world. And he's a very humble guy and he probably would disagree with that. But I think he's that kind of guy. And if you stick around, maybe you'll squeeze the name out of me and I'll. And I'll Shout him out too, because he's that kind of guy. He deserves it. Anyway, I was there for a while and then I went in house for a brief spell.
And when Covid happened, I ultimately decided to do my version of hanging a shingle. And all along it has been trademark work, it's been brand protection work, because that is what I was, you know, blessed enough to learn from the beginning. And I've only expanded on that specific area of knowledge. I like to tell people I'm an inch wide and a mile deep. If your question is about brand, I'm your guy. If your question's about anything else, I'm 100% not your guy.
And that's been my calling card and it's been my M.O. from the beginning. What do I love about it? I mean, I tell people, if you have to be a lawyer, be this kind of a lawyer. I mean, if you absolutely have to, there's a lot of ways you can make money. You don't necessarily have to do it by being a lawyer, but if this is your, your path, get into trademarks, be a brand protection attorney. And I say that with fear and trembling because I don't really need a ton of new competition, but it is better. It is a great line of work. You know why? Because I get to do just about everything. I get to be a subject matter expert rather than a this kind of lawyer or that kind of lawyer. If your question has to do with trademarks and brand, I'm your guy. And I like being that person that people know that they can call when they have a problem and they know that I can solve it. Whether we're going to use trademarks as a sword to play offense on our, on our rights, or as a shield to protect ourselves, or think about ways to increase its value as a store of value for, for an exit or what have you. I like coming up with those answers. I like knowing them through my experience and I like working with young companies.
Most of my clients are small midsize companies, middle market companies, and companies that have grown a lot.
I try to hang on to companies when they become super giants or when they get, you know, post ipo. But very often I, I find myself working on a team with a larger firm by them because needs change. And I like building things and I like being around people who build things. And so that's been really gratifying.
[00:05:01] Speaker A: Awesome. Well, let's talk about those builders here. Let's talk about the founders, the startup companies here.
When you meet, whether it's the Owner of a company, a board of a company, what is the most telling sign that they think that they have a brand, but they don't actually have a protected asset yet.
[00:05:21] Speaker B: A lot of times what happens is they, for a very successful company, revenue and customers and ops outrun identity because that's what you wake up in the morning thinking about. And I'm no different. I wake up in the morning and I think about top line, bottom line, how am I going to minimize cost? Where am I going to get new clients? I get energized by looking for new clients. As you know, you know me. That's kind of where I, it's my bread and butter. That's what gets me going, is these conversations and finding out what people care about.
And the analogous case for a founder is you are living in, in ops, you're living in, you know, revenue work, you're, you're living in product, but you're really not living in brand if you're successful. What's funny is new companies that are less successful will do a lot of front end brand work and asset collection. And like, let's make sure the website looks great and let's, you know, let's build a car, but not put the engine in the car, you know, whereas really, really high potential companies have really crazy good engines. And then the exterior of the car just doesn't really pop. It doesn't really look great. And so the best companies call me at the right time and know that as much as they need to focus on the hard value items of the company, that these other things really do matter. They really do go to value. They really do go to, you know, helping customers find you and making sure that customers who want to find you don't find somebody else.
You know, and they deputize us to do a lot of that work. And I hope I'm answering your question, but that's the idea that when I see a company that is a rocket ship, you know, generally speaking, they have their affairs in order and the underlying thing that they're doing is clear, ascertainable. It meets a need that anybody in an elevator can understand.
And when those two things are working together, those are the companies I get really excited about helping.
[00:07:43] Speaker A: Awesome. And so let's break this down a little bit easier, like plain English here. What does a trademark, what does it really buy a company?
[00:07:53] Speaker B: Absolutely.
A trademark.
I want to start by talking about who owns it, because a lot of people think I own the mark. And of course, in a, in a sense you do. When you own a trademark registration or when you adopt a trademark, that that is, you know, how customers find you. But the underlying logic for why we have trademarks at all is not that you're the owner of the mark, but rather that you're the steward of the mark. You're taking care of the mark. And the mark exists as a protectable asset for the benefit of customers, for the benefit of consumers, is in the absence of valuable trademarks, the absence of trademarks that the law protects, a lot of things happen. Customers will not find you, or they'll think they're finding you and they're finding a competitive company that realizes you're valuable and they will offer things of lower quality. You'll buy them, you will be unhappy with them, and you will seek redress, probably against the underlying company.
So, you know, what do trademarks do? Trademarks help customers make sure that what they're buying is what they intended to buy.
That's really the idea. And there are, of course, trademarks that are affiliated with nonprofits and things that aren't particularly selling things. But you have economic interactions with those companies as well. You want to make sure you're donating to something that's the worthy cause and so forth.
So I like to think of trademarks that way and say they're a signal. They are a signaling device to customers. Hey, this me. I'm over here. I'm not this guy. I'm this guy. And so the big risk with trademarks then becomes confusion. But what a trademark is, is it is an asset, is this. It is a. It is an asset that is source identifying. It is anything that a customer, potential customer, sees, intuits, hears, you know, absorbs that makes you. Makes the customer think of you, not just of the thing that they're seeing.
A good example, and most trademark practitioners have a million of these locked and loaded, ready to talk about.
But common one everybody knows is the Nike swoosh.
When you see it, you don't just see it and think, hey, that's a swoosh design. That's a neat design. You think, hey, whatever that's on is put out by Nike. And I have a general idea of what Nike's about and the quality and everything, both good and bad, right? And we want to minimize the bad and maximize the good. And that is what brand development is. That is what growth of a brand and market position. And all that tends to be is what is called to mind, what is symbolized by your marks.
And that's what. That's what we do. So that's what a trademark is. It is a valuable thing because getting customers is a really valuable thing and becoming it, but also becoming a symbol for what you are about as a brand is a really valuable thing because that's what builds brand loyalty.
[00:11:09] Speaker A: Yep. And obviously it's there for a reason because some people abuse that right. And you've worked cases from prosecution to enforcement here.
What would you say is the most expensive small mistake or minor mistake you see in early stage businesses that these startups do make with names, logos, taglines, things of that nature?
[00:11:29] Speaker B: Yeah, there are expensive mistakes. I don't know that I would, I would ever point to a single most, but I would say there is, there is a most expensive mistake you can make when you think about a trademark as sword, shield or asset.
So if you're thinking about your trademark as a sword, meaning you want to go on offense, you identify an infringer and, and you want to make sure that your mark is, is strong, that your market position is sound and so forth.
If you delay in getting a trademark registration, that could affect your rights in a very expensive way.
A federal trademark registration is not necessary for you to have trademark rights. All these rights exist in the common law. That's where they, that's the origin of them. So if you start using a trademark tomorrow to market your products or whatever, you start building rights immediately in, in that.
And so that's good, right? You're building rights and those rights exist where you can prove that you are understood to be a brand. So those rights are going to be heavily local. And in the days before computers, they are hyperlocal. They're like where you took out an ad in the newspaper.
Now, you know, with the advent of computers, you could basically say, hey, anywhere somebody can find me on the Internet, I'm known as a brand.
It gets a little different. But bottom line, why are you going to try to prove yourself as a brand like that when what you can do is get a federal trademark registration, which once you get it, gives you nationwide priority. It means nobody in Anchorage, Alaska is going to be able to adopt a confusingly similar mark and register it. They might adopt it and use it for some period of.
But if you ever show up in Anchorage, Alaska, sorry, you gotta go, because you were on notice that I had these rights and that gets me into an expensive mistake. When we think about a trademark as a shield, which in which means, you know, not doing your searching, not figuring out if you actually do have these rights on the front end, you know, a trademark will protect you from intrusion as well. But when you're adopting a mark, you want to make sure that you can, that you can have sort of a clear path to developing rights in this mark.
Strong, protectable, distinctive rights in this market. Not worry about somebody who might come out of the woodwork and say, hey, that mark is way too similar to mine. The services you offer are way too similar to mine. We can't coexist peacefully in the marketplace. It's inevitable that there's going to be confusion here.
And so you just got to change your mark. You want to know that earlier than later.
And with the advice of counsel, you might just digest that risk and say, okay, we know that this company's out there, but for these reasons, there's a reasonable basis to move forward. At least then you know, at least then you can make a plan for the future. But it's very expensive not to realize that you may not have rights as broad as you thought. And you get halfway down this path and you're looking at either an expensive trademark litigation action to see who's right to see if you can coexist or not, or you rebrand, which generally speaking sounds less expensive than expensive litigation, because everyone knows how expensive litigation is. But a rebrand can be extraordinarily costly.
[00:15:08] Speaker A: Absolutely.
[00:15:09] Speaker B: Not just, not just in terms of paying for a brand agency to come up with a new deck for you, but the legwork that it takes in re educating the public on how to find you is taken for granted because it is not really something you measure in money, but in money's worth, especially in time.
And so that's very expensive.
One other thing I'll add, that is an expensive error that, that businesses make and that maybe you may see when, when you're talking about how to, how to solve businesses problems is especially small businesses, they're very concerned about taxes and they want to make sure that they low. That they lower their tax obligations. And so sometimes they figure out ways to show less revenue to pay less tax, you know, and, or show less just value, I don't really know, you know, value owing to the brand or whatever, to pay less tax and things like that. The advice I would always give any business is show as much revenue as you possibly can if you ever want to sell this thing at a multiple or whatever.
Show all the revenue you can, show all the assets you can make this thing really valuable, pay the taxes that you owe and get this thing valuable as heck. Yeah. Because I promise you saving X on taxes in 2025 isn't a hill of beans to getting a 3x multiple on on a really high revenue number in 2029. And you should take that future principle approach to your business.
[00:16:47] Speaker A: Wonderful. Well, hey, we are here with Zach Eister. And next we're going to push into the money mechanics here of how weak IP posture shows up as a real cost rebrands, lawsuits, delayed launches, and even lost deals. We'll be right back.
I'm Alan Franks, host of Frankly Speaking Only on NOW Media Television. We're here with one goal and one goal only. Our aim is to solve any business owner problem anywhere, anytime. Join me for my next episode of Frankly Speaking Only on NOW Media Television.
And I'm back with Zach Eiser. Now I want to talk about what founders feel in real life when the legal side of the brand becomes a financial emergency instead of a controlled strategy. So we're going to dive into the operational and the financial consequences of this. The customer confusion that can be had, the paid media waste that could be had, the platform takedowns, demand letters, and the growth penalty that shows up when companies pause expansion because the name isn't defensible. So, Zach, what's the fastest way a founder can accidentally build on someone else's right, even if they didn't copy anything intentionally?
[00:18:24] Speaker B: Yeah, I mean, I would say 99% of the time, founders who are growing fast and have a great idea that they're excited about, do this innocently, in other words, not in bad faith innocently. Some of my colleagues in the biz might say, well, you didn't do an adequate search or whatever, and that's not innocent. But you and I both know that most people who are not legal practitioners are more concerned about their industry and growth than they are about being fully buttoned up on the trademark side. And what I would say is call your trademark practitioner one day early versus one day late. You'll be glad that you did.
I know that legal is expensive. And the way I like to frame it is do you want an ascertainable, clear, usually flat rate on the front end, or do you want to hire me as your most expensive white collar employee for two years? Because that's what happens in a lawsuit. It's not just me, it's my whole team. And so it's very expensive.
I think we're going there, we'll talk about that. But yeah. What's the mistake? The mistake generally is you're growing quickly, you have a product that works and you name it something that is intuitive and makes good sense, and it Might be suggestive, not purely descriptive of what you offer. So it might conceptually work as a trademark.
The one that comes to mind right now is like, let's just say I came up with a new floor cleaner and it was really good. And I called it Mop and shine or something like that. Well, mop and Glow exists. Right? And there they are. And you didn't know about it. Maybe. I mean, in my hypothetical, you didn't. You just adopted your mark. And it. And it sounds good, and it's. It's not descriptive, but it's suggestive of what you're doing here. And you think it's a good mark, and the customers love the mark and they're telling all their friends about the mark. And then you get a demand letter from P and G or whoever owns that. That brand. I don't actually know who. And they. They say, you can't use this. There's a likelihood of confusion. And innocently, you adopted the mark because conceptually it works. But in relative terms, relative to others, do I have the ability to grow this brand?
That's where mistakes happen.
And it is never a comfortable conversation. And it is a conversation that we have a lot is we just say this mark is high risk. You have adopted a high risk mark. I can't believe this. We've been using this for five years. What do we do? I say your two options are continue aware of this risk.
And you're telling me no one's ever confused. I mean, in this hypothetical, I guess you're saying no one's ever confused you with them. Okay. And you think it'll be fine or rebrand. And either one of those, like I said, is a very expensive option. And what ends up happening is that's the mistake that new companies make is, is growth outpaces reasoned consideration of what to name the brand. Because it's just going.
When good ideas hit, they hit. And I believe you. I know the feeling. But sometimes you do need to again, call your professionals that you trust and ask for their opinions on things, because that's far and away less expensive. I do not put my kids through college on preliminary trademark knockout searches. It's not that. It's the litigation.
[00:22:06] Speaker A: Interesting. So let's talk about that. When you get a letter and a dispute hits, what have you seen to be the big cost that people don't necessarily see coming? You have time, you have distraction. There's probably maybe some lost sales, some obviously legal spin that we've talked about, maybe even some reputational damage here. But So I had a CPA on last week, and we were talking about, when you get that letter from Uncle Sam, that love letter from Uncle Sam, you don't know what's in there. So that letter comes to you. How does that look like? How does that feel like for a business owner? And what typically the length of time and how much money is it typically to defend that?
[00:22:50] Speaker B: Yeah, well, these things are on a spectrum because, you know, there. There could be the. You got a demand letter from somebody who's got you dead to rights, and that's an. And that's a considered, you know, a set of considerations, or you get a demand letter from a company that is really trying to create a wider scope of protection than they have any right to, and they're just completely out to lunch. And there's a set of, you know, of action steps we take in that circumstance. And. But everything kind of runs along that spectrum, and there's lots of considerations. How well healed is the demand letter writer? How big or small are they?
What are the real merits here? But I'll just use a couple of examples to hopefully add color. To answer your question, for typical founders that might be watching this, if you get a demand letter from someone where it's a 50, 50 question, where you think, oh, gee, they might have some merit, it's not frivolous what they're saying, but I don't think that I should have to change my brand as a result of this.
This is wild stuff. You bring that letter to me, and we will formulate a plan. And now I work in alternative fees all the way through up to litigation when we litigate. Can't really do that. Got to get a retainer in place. Got to bill hourly because I have a dance partner. I don't really know what's coming. But everything else short of that, we always work in flat fees. We want to give our clients some concrete things that they can, you know, build on. Because when you're building, you really can't have an unknown, unknown, you know, cost, because it's just. It's too unpredictable. So we try to give that predictability to our clients. But for, you know, we take a look, we form a plan, and for a couple thousand dollars end to end, we can probably send the message back and say, look, we take these rights very seriously. We had no intent to trade on your goodwill. We don't ever even want to be confused with you. That makes no sense for our business.
We don't think that we have to do anything. But in the spirit of good faith. Here are the things that we're going to do. We deem the matter closed. Yep, that's. That's a good case scenario. If you can get out of this for a couple thousand bucks and. And you don't hear from them again. That does occasionally happen. Why does that happen?
For the same reason you wouldn't want to sue somebody. Because you're going to call your lawyer and they're going to say, all right, you want to sue them. All right. If they answer, you're going to be in this thing for a lot of money. Even if we go to mediation and resolve it in mediation in three months, it's still not nothing. You are in it. So are you.
[00:25:26] Speaker A: Sure.
[00:25:27] Speaker B: And even big companies, the biggest you can think of, aren't really excited about litigation because they have chief legal officers who understand themselves to be red ink. Do you know why they understand themselves to be red ink? Because every other department in the business tells the legal department, you are red ink. You are a cost center all the time. And so they are very aware of that. So they don't really want to get engaged in lawsuits.
[00:25:52] Speaker A: Yeah.
[00:25:53] Speaker B: So there's not really. Everybody's motivated to avoid an action, and you can use that as leverage to get out of these things. And that's the same reason when you get a demand letter, when it has no basis in reality, you say, kick rocks. You know, if you want to elevate the. Escalate this to a new place, you can try to sue me. We are confident we'll prevail on the merits. Please go away. I mean, there's lots of responses that you can do, and they have to be calibrated to all of these, you know, little factors now when. When they've got a really good case, when it's a 70, 30 action, because there's no such thing as 100 percenter ever.
Jury trials are unpredictable by their nature. And if you settle short of a jury trial, you will always get some version of half a loaf because there's no such thing as 100 percenter.
But if you get an action that you think, oh, gosh, we didn't know this looks bad, what do we do?
Generally speaking, we try the same thing. We try to resolve this in good faith to avoid confusion.
But then you're stuck in a difficult situation.
You know, again, there's no 100 percenters. So you can litigate the action and see whether a jury will agree with you that there's no likelihood of confusion here and you'll survive or you'll have to rebrand and that is extremely expensive. You'll want a sell off period. You'll want a phase out. You'll want the opportunity to re educate your customers as to where you are and who you are. You want a settlement and release from the letter writer to make sure that they don't come after you later. All these things cost leverage and cost money.
And so, you know, I think it is as expensive as not most of the time if you're going to have to rebrand. That's why the front end hygiene work is so important. Because when you get that letter, there is no way out that doesn't cost you something.
And forget about money. It's time.
When you're in an action and you think you have a good basis to fight it, if it's less than 50, 50 for the letter writer and they're working really hard to try and expand their rights and they're just coming after you, sometimes you just can't. Sometimes it's unavoidable and you just can't give in to a bully and you have to fight.
It's expensive. It is expensive financially and in the form of your time. Because founders don't have a lot of time. New businesses don't. They're short of time because they're also short of personnel. And the biggest issue that I run into with clients is not them arguing about bills. We're very competitive on our rates. We don't overcharge. I don't get in arguments about fights about, about money, hardly ever.
It's the stress of the action itself and the amount of time that has, that has been dragged away from, from important people in the, in the business who could be doing other things to grow the business and are now instead becoming, you know, quasi lawyers alongside me. It's tough. And that's, that's really where a lot of the cost is hidden.
[00:29:06] Speaker A: So, Zach, I think you lay out a really good multiple reasons why you want to get on the first front end of this and not be calling you on the back end. So if someone listening today wants to evaluate their current risk level when it comes to their copyrights, what is the best first step? Is it an audit that you do? Is there a clearance search that you would recommend that they go search? Is there reviewing the brand and how it's used in commerce, what's an easy thing that they could do? Obviously they can give you a call, but what's one easy thing that they could do? If they're flipping out right now about their brand that they check and see how risky is it.
[00:29:42] Speaker B: Yeah. First thing I would do if I was a business owner listening to this conversation, thinking, wow, these are a lot of things I haven't done is first take a breath and say, have I ever gotten a demand letter in the X number of years that I've been using this mark, has anyone ever sent me a letter saying, you are infringing my rights and you darn well better stop it? If they haven't, then you can take a beat and say, okay, well, at a minimum, in this territory where we've been using this mark, we have not drawn the ire of large, well heeled companies that are normally aware of everything. I'll tell you, I mean, I've done work for, you know, Fortune 50 companies as part of large firm work that I've done. And they do what we call street level enforcement all the time. They are watching for infringers all the time. They're doing their best to capture stuff. Do they police everything to 100% effectiveness? No, but they're out there a lot. And so at least as a first step, relax. The second thing you want to do is contact a trademark lawyer. Do you have brand counsel?
And I would say, don't call someone who dabbles. Like I said in the beginning, I can't solve any legal problem that you have outside of my bailiwick, my realm. You know, the scope of my remit is really brand work, end to end.
Find someone like me. I mean, they exist at large firms, they exist in small firms. Ask. We can get into the types of questions you might want to ask someone when you're interviewing counsel to sort of, you know, stress test the level of their knowledge and make sure that they do have the ability to help you here.
That's always a fun thing to talk about. So we can maybe talk about that in a second. But find brand counsel that you trust and say, hey, you know, this is my mark.
Either you have, if you have a federal registration, take a big breath. But if you don't have a federal registration, say, hey, I want to register this mark. And can you do some clearance work and do a commercially reasonable search and just see what's on the register? See if I can register this mark.
Usually when we do those types of searches, we'll come back and say, either, yeah, you can register it, no, you can't, or here's some stuff we found.
It's in the middle. It's not risk free, but you might want to consider this and that and we'll put together a plan and we'll see what of your brand is protectable. What if it is salvageable, if there's a hit that we found and form a plan to start to expand your rights and think about next steps, think about your exit, think about when you're, when you're ten times as large as you, as you were. Those, those days are coming if you have a successful business that's coming. The other thing I would tell any business is just to build it, bake it into the bread. If you're going to be successful, you're going to draw the attention for infringers and you're going to draw the attention of people who are seeking to in my view, behave anti competitively to try and limit the scope of your rights.
It's going to happen. That's what success breeds. So you get your brand in order as a sword and a shield and you go to work.
[00:32:56] Speaker A: Perfect. Well, hey, up next I'm going to connect trademarks to the bigger wealth picture, how IP strategy supports licensing expansion and future exits. We'll be right back with Zach Eister, Foreign.
Host of Frankly Speaking Only on NOW Media Television. We're here with one goal and one goal only. Our aim is to solve any business owner problem anywhere, anytime. Join me for my next episode of Frankly Speaking Only on NOW Media Television.
[00:33:37] Speaker B: Foreign.
[00:33:50] Speaker A: Welcome back. In the previous segment we talked about preventing losses. In this segment we're talking about building leverage here because protecting intellectual property can become an engine of growth, not just a legal shield here. So Zach, when a company wants to license its brand, what's the minimum viable protection needed before they sign anything thing.
[00:34:10] Speaker B: So if you want to be a licensor, you know, you can license an unregistered mark and brand to third parties and you know, say like, you know, if you're a very local company, you could license a brand without a federal registration. But to me in licensing table stakes is, is a federal registration you should register your mark and, and this is not me advising that you bloat your portfolio and register a million things. But experience has taught me that in licensing one registration is table stakes three looks great. More than three doesn't really mean anything. So if you have, you know, your word mark, your word and design composite mark and then maybe some like your version of the Nike swoosh, that's a nice family of marks that look like, that look like an independent locus of value for someone who wants to be a licensee and just put yourself in the shoes of the licensee, they want to see that you have a strong brand that is going to do some of the work that, that will draw customers to you, that you believe that you would have trouble doing if you were just going to hang a shingle. Yep, that's, that's the, what you're, what you're communicating to a potential licensee is I'm going to make your life easier in an amount greater than what you're paying me than hanging a shingle. And so having federal registrations and a strong brand that you can point to and say, hey, you know, this is what we're doing, this is what, this is how customers think of us. And, you know, you get to play in that sandbox. That also leads us to franchising as well. I do a lot of work in franchise systems and it's the same idea. You know, the core of a franchise is licensing the brand. There are more controls that the franchisor exercises over the franchisee. But it's the same basic premise, is that you, you're buying in to a business opportunity to participate in the licensor's life, you know, professional life or the franchisor's professional life. And you believe that doing that would get you more money in the end than what it costs to participate. Whether that license fee or the royalty fee is 6% or 16%. You know, that's a business decision. And as lawyers, we never really say what, what a reasonable royalty is, other than to say, hey, in this industry, experience has told me this is a little above market or a little below market.
But beyond that, we don't really comment on business terms. But that's table stakes. You should have federal registrations one to three.
[00:36:52] Speaker A: So let's talk about a little playbook here. So we mentioned earlier how this all goes into the exit strategy. Right. The value of the brand is also, is integrally intertwined with the value of the enterprise, value of the company.
As a company is starting off, it's getting into growth mode, it's maturing here, maybe it's preparing for exit. What's a good playbook for a business owner here throughout those stages? If they were to come hire you, what would they be doing there in the growth stage or in the startup stage? In the growth stage. And as they are preparing to exit.
[00:37:29] Speaker B: Yeah. So once you've got your federal registrations, which have sort of harped on over again that they're table stakes, they're what you want, once you've had your registrations for five years, do. It's called A declaration of incontestability. It makes your marks legally incontestable in a number of ways, gives you a ton of procedural and legal advantages. Do do all of the legal hygiene that you need to do and then protect it. You don't need to police the market against each and every mark that could infringe you.
There are some prudential decisions you have to make, but do the stuff that you would want done if you were a buyer.
What's the job of buyer's counsel? What's the job of the valuator that the buyer hires? Is to identify commercial weaknesses that might lower the purchase price. So don't give them any room to do that.
Show that, that hey, as a brand we have done the work to make sure that the register is clear, to make sure that the uses we've identified are not, you know, a problem. To make sure that third party social media and other websites that, that people use as marketing tools don't have infringing marks on them.
That sort of thing is very valuable and it's not especially expensive. You know, when you monitor for our clients we use a number of tools, some of them AI enabled, to track new registrations, new applications on the register, flag them for our clients and have our clients decide, hey, is this one that I want to take action on? Is this one that I want to fight? And if you do, we do. If we don't, we sort of have a laid out logic as to why we didn't.
And that paper trail is extremely valuable. You're going to set up a data room when you're in a purchase situation and there's going to be stuff that you might share with your buyer to say hey, this is why we didn't do this. You know, we didn't do this because you know the, the core of our mark is this and this is a little bit different. And so we decided to prioritize protecting this and we have because look at all, look at how valuable this is and that really does help answer some questions. So you should, you should do the street level enforcement, you should do the, the early enforcement stuff to make sure that you have a strong, relatively substantially exclusive to you brand because that's where the value lives.
[00:39:58] Speaker A: Just repeat here. We start off with the simple copyrights, getting it registered. Then after five years we can have this incontestability, we can file for incontestability. What if you've already been using the name and the brand and the image for, for the last five years? Can you do both of those? At the same time, no, you can't.
[00:40:17] Speaker B: So when we're registering a trademark, you're going to get a federal registration. And that federal registration gives you all kinds of advantages. You're going to be able to get nationwide priority. Like we talked about, the ability to sue in federal court, the ability to assert various types of damage calculations that might not have been available to you before. And one big thing we haven't talked about yet is takedowns on third party sites, social media sites and the like.
Most of these companies don't accept common law rights as a basis for a takedown because then that turns them into an arbiter of who's, who's telling the truth.
And they don't. They lack the capacity and the judgment to do that.
But what they can do is say, well, who has a federal registration? If you have a federal registration, you're presumptively the owner of this. And if, if we're wrong, sue them in federal court, get your registration, and then come back to me, which is something that I've done before when we've had an infringer, obtain a registration under the nose of our client. They had to sue them in federal court to then substantiate a takedown request that they made on Instagram, which was their primary marketing platform. So it was extraordinarily expensive and it took over a year to do. And that's not great. You don't want that to be you. So you want to get your, your federal registration.
And then the incontestability comes from five years of substantially exclusive uninterrupted use where no one has challenged your rights.
[00:41:49] Speaker A: Yep.
[00:41:50] Speaker B: When, if that's the case, you say, okay, my mark's been registered for five years, which means the whole country has been on constructive notice. They've been on notice that I have this. You can, you can look up federal trademark registrations anytime you want. And in those five years, nobody said boo. Yep. Well, now it's incontestable. You had your opportunity. Now you can't argue that, that I don't have these rights.
[00:42:10] Speaker A: And after that.
[00:42:11] Speaker B: So that's when you would file that.
[00:42:12] Speaker A: After that incontestability. Do we need to renew this on an annual basis every five years?
[00:42:19] Speaker B: You do need to renew your registration because you need to keep using your mark. Trademark rights only accrue through use. If you stop using your trademark, you will lose those rights. Not immediately, because abandoned, the basis for abandonment is non use, cessation of use. Excuse me, with no intention to resume use. That intention piece is why we litigate. Because, you know, who knows what I intended to do. But if you do cease use of your mark, you become vulnerable to an abandonment argument. So you do have to renew. When you get a federal trademark registration, you renew at the five year mark, the ten year mark, and then every ten years after that.
[00:43:02] Speaker A: Okay.
[00:43:02] Speaker B: However, once you file your declaration of incontestability, which you can do at the five year mark, but you can do really any time if it's been at least five years, you know, you could do it at 10 year mark, you forgot to do it at the five year mark. I don't ever advise that, but you could. Once that is filed, it's filed and, and, and it's performing its function for you.
[00:43:22] Speaker A: Great. And we've talked a lot about here within the United States of America, and obviously some of these trademark laws have really helped promote economic growth over time. It helps innovation. Right? Oh, what about internationally here? What if somebody wants to expand their business internationally here? How can they protect their name and their reputation from the international world?
[00:43:45] Speaker B: It's a great question, and the answer is always one that flummoxes and frustrates business owners because it's expensive. But I do think it is an underutilized opportunity.
The basic premise is that trademark rights are jurisdictional, meaning your rights end where your country's borders stop. And so if you want to go get rights in Canada, you got to go to Canada and get those rights. And you might even need to be using the mark in certain jurisdictions to keep those rights.
Other jurisdictions, it's just first to file, you get there to the office, first you get the rights. Every country has their own laws on this. However, there are certain international treaties that almost 200 countries are party to. All the ones that you care about. Maybe not North Korea and the like, but most of the ones that matter.
And we can file a home trademark application in the United States and then expand those rights by filing daughter applications in jurisdictions of your choice.
It does save money because you don't have to pay for a lawyer initially in all these places. But it is expensive in the sense that every country has their own fees. In the United States, for example, you want to file a trademark application in the US it's $350 per class of goods and services that you claim. So like, all goods and services are divided into classes. So, you know, shirts are class 25, SAS is class 42. You get the idea.
So that's what the US charges.
Other countries charge much, much less.
I'm trying to think of a really cheap one. I think Australia is fairly inexpensive, at least less expensive than the US and then some are extraordinarily expensive. The UAE for example, is I believe $1,500 just just to pay to get on the ride.
And the EU for example, is I think, you know, something in the neighborhood of €1300, if memory serves. So these things are expensive and that's not to do with lawyers, that's just the local fees to file.
But if you are a brand that is used in a genuine sense in an overseas jurisdiction, you just can't lie down on that. You have to be proactive because infringement in some countries is even more of a risk than in the United States. And in some countries common law is not really a basis to allege anything.
Certain the common law is an innovation of English law. But other countries don't really have that tradition. You got to go get statutory rights, you got to go get your rights to come to court at all.
So it's not something you want to sleep on and so you want to do that. What I recommend our clients do is rather than getting a registration in all 200 countries, because only the biggest companies in the world that actually do go to all 200 some odd countries, the local one that comes to mind is ups. They are everywhere and they're going to need a registration everywhere. And so their portfolio is going to be extraordinarily large.
And fortunately they make a lot of money and so they can afford to monitor thousands of trademarks across the world. That's not generally my client base.
And so what I would tell them is let's look at a pie chart of all global economic activity. And I bet you if we are intelligent about it, we can gobble up about 60 to 70% of that pie and only have to register in a handful of jurisdictions. And I'm sure you can think of them, if you thought about it, we would do the us, Canada, Mexico, eu, uk, China, India, Japan, and maybe Australia, New Zealand, because you want to get the Anglosphere, you know, South Africa, potentially the Awapi, French speaking countries on the, on the west coast of Africa, potentially, Nigeria, potentially.
And that covers a lot of ground. You know that, that, that does a lot. Even if you just said we're going to go us, eu, uk, China, I don't have the numbers in front of me. But I bet you if you post production a pie chart of what the international global economy looks like, you're getting really high up there with just that
[00:48:04] Speaker A: up in the 90 percentile. There.
[00:48:06] Speaker B: Right. And the reason you do that then is if I can assert statutory and or common law rights in 70% of the global economy.
And it just doesn't make good sense for someone to infringe me where I am not and use that to bootstrap rights anywhere else. Because if you can't access certain global markets, it doesn't make sense to adopt that market and actually compete. And this is where you have a huge advantage as an American company. If you're an American company, the United States economy, it works in your favor a lot because everyone wants access to this market. And so if you're in front and you can foreclose this market, you are in the driver's seat.
You want to do international filings. But having the catbird seat in the United States is extreme leverage.
[00:49:00] Speaker A: Wonderful. Hey, Coming up in our final segment here, I want to talk about exits and valuations and how buyers and investors interpret IP readiness, how to reduce deal friction before it shows up on the term sheet. We'll be back soon with Zach Eister.
I'm Alan Franks, host of Frankly Speaking Only on NOW Media Television. And we're here with one goal and one goal only. Our aim is to solve any business owner problem anywhere, anytime. Join me for my next episode of Frankly Speaking Only on NOW Media Television.
Welcome back to our final segment. I'm here with Zach Eister. Now, I'm going to put this in an investor language, risk defensibility, documentation, whether the brand can survive a transition without the founder. Here we're really talking about is how to protect the enterprise value here. So, Zach, when a buyer is doing due diligence on a company he's about to spend a lot of money on, what are the first IP questions they ask that can slow or maybe even stop a deal?
[00:50:30] Speaker B: Well, the big questions that come out is any litigation, anyone challenged your rights? Do you have federal registrations? Are you aware of any third parties who are in other jurisdictions who assert these rights? You know, all these things that are short of a perfect bill of health for the brand, These are very common questions. And you're going to have to populate your data room with all the documents that go to that issue.
Because if there is open litigation, if you do have, you know, oh, we got this action in the central district of California, they are totally wrong. They don't have any rights. I hear that from a founder all the time. I hear that from somebody trying to make an exit all the time. Oh, these guys have no idea what they're talking about. It's ridiculous. You don't need to worry about it. I'm like, well, I do need to worry about it. And your buyer is definitely going to worry about it. If you have anyone who's asserting rights over yours anywhere, that's a big issue.
So when you're thinking about an exit, make sure that there's no active litigation for sure.
And by the way, if you're involved in litigation and someone has sued you or you need to sue somebody and they are in this process or they are thinking about an exit, it's extraordinary leverage to play the action because they don't want to disclose it.
Franchisors don't want to disclose any active litigation about the brand. That's the type of thing that they would have to disclose to their entire franchise system.
[00:52:00] Speaker A: Yeah.
[00:52:00] Speaker B: So all of these things go to the very basic question of how valuable is my brand?
How likely is it that when someone sees it, they're going to know it's me? So you've done a ton of marketing work to make sure the whole country knows that it's you. That's great. That goes to enterprise value. You've registered your marks federally and you've kept them in good working order. That goes to great enterprise value. You've appropriately done takedowns and so that, you know third party social media sites and Etsy and Amazon and all the rest don't have a lot of noise on their records that could cause confusion with you or lead customers away from you. That goes to enterprise value.
Keeping the register, the Federal Register, clear of any third party who could.
Let's just say the core trademark element of your brand is the word cosmic. And everything else is cosmic. Tax preparation.
I'm making that up. I don't know if there is one. Don't look it up. But anyway, let's just say you're a tax preparation company, but the core of your mark is cosmic.
Well, if you've done a lot of work to keep cosmic Marks marks with the word cosmic in it out of class 36 for tax preparation services and it's substantially exclusive to you, it's tremendously valuable because it's just a clean, fertile field for a buyer to expand on that brand, knowing that you've already eliminated a lot of potential third party issues, that's incredibly valuable.
So you know how that valuation is done.
That comes down to accountants and professionals who are outside of my area of expertise. But what I do is present those individuals with as clean a bill of health as I can so that they can assert as High a value as possible.
[00:53:55] Speaker A: Great. So the documentation, like the registration, the assignments and usage, evidence, enforcement history, if they have been attacked, those are all super important to be able to give to your deal team when the buyer comes back and tries to poke holes and lower that valuation.
[00:54:12] Speaker B: That's right. I mean, one thing I try to keep on the front end, on the front burner for clients who are engaged in litigation is, hey, let's fight this. Let's get. Let's get an order from a judge, signed by a judge, saying that this is a strong mark and that you own it because it's really valuable. It's valuable not only in the moment because you win. It's valuable against your next enforcement target because you would probably attach it to your demand letter. Hey, you may be interested to know that this judge in the Western District of Texas said that this is my mark and it's valid and enforceable across the country.
So give that some thought. And you're certainly going to attach it to the documents that you want your buyer to see. You know, and you know, there, there's reasons why tactically in a litigation, even if you're settling it, you would want a consent order or consent injunction entered where a judge signs something that you have drafted, more or less that says all the good stuff that you're going to want subsequent infringers to see.
And so anytime you can settle in, in a litigation like that, that is using your brand as a sword, that is turning your brand into an offensive weapon and increasing it as a store of value, because that's something that a buyer's counsel is going to love to see.
[00:55:34] Speaker A: Yep. Yep. Now, that being said, okay, let's say that we're in a. We're about to sell our company. Nobody's ever challenged us on it, but we also never took the. Took the steps to go get it copyrighted. Right. Is trademark.
[00:55:47] Speaker B: Yeah, sorry.
[00:55:48] Speaker A: Sorry. Yeah. When is it too late to do that? Or if somebody, if they're about to enter and get an LOI or something, can they still give you a call up and can you help them in that stage?
[00:56:01] Speaker B: Yes.
It's almost never too late. I'm going to tell you the one break glass in case of emergency scenario where it is too late. But if you haven't filed a trademark application yet, file it. File it now. You know, if you've been using the mark for 30 years, file a trademark application and see how far you can get. The only kinds of marks that are going to be a problem for you on the Register are marks that either have been in use longer than you or that have been registered for longer than five years and are now incontestable. Because other than that, if there's somebody who's on the register who's got a four year old registration and I've been using it for 30 years, you know, you reach out and say, hey, I don't want to have to petition to cancel you, but I'll cancel your registration if I have to so that I can get mine to support my enterprise value. And generally speaking, when you're in that situation, you understand that it's a tricky situation for everyone. You might figure out a way to coexist is what happens very often. But you can get your registration on a concurrent use basis or some other way. You can get an asset almost always. Now, if you have been using your mark cosmic tax preparation for 30 years and someone has a registration for cosmic accountants and they've been using it for eight years and they've got a federal registration, that's incontestable, that's tough. There are maybe some things that we can do to try and get a concurrent registration to say, hey, I know I'm not entitled to this federal registration, but I've been known as a brand in this area for way longer than them and I'm entitled to a federal registration. Can we get a concurrent use proceeding going?
It's messy and it would take time and fortunately that messiness cuts both ways and your target might not want to be messy either.
But it's not too late. It is not ever too late.
And I would advise anyone who has not gotten a federal registration to do that. It is a very good asset that you can put on your asset list in a buy sell situation and you should do it yesterday if you haven't.
[00:58:14] Speaker A: Yep. And in your opinion, does it actually add value to the company or does it just not take away value?
Like if you did not have that stuff and there was legislation like do you think it actually adds to the enterprise value or it just helps make certain that the buyers don't come in during due diligence and take away from the overall sales price, I believe it
[00:58:35] Speaker B: does add real value.
And the absence of it would cause a buyer's counsel to give a haircut to what it would otherwise have valued the business because it is real value. It is not a pretext to lower the purchase price. When you have federal registration assets, your scope of coverage is broader. Your basis for international filings is more robust. Your ability to enforce against infringers is stronger. The likelihood that the public knows you are you is much higher.
All of this, it's very difficult to put a dollar value on it. Smarter people than I am do it every day. But I can tell you that when we have these things in place, the amounts are indeed higher. And I don't think that that is pretextual. I think it is actual awesome.
[00:59:27] Speaker A: Hey, Zach, where can viewers connect with you? How can they reach out to you?
[00:59:32] Speaker B: Easiest way to get me is by emailing me at zachspire Law. We're at Law, not a dot com.
I'm accessible on LinkedIn. Of course.
My business number is 678-301-0955. Happy to take calls as well.
My number one ability is availability, and that's what every lawyer's number one ability should be.
So that's the standard that we set, and I'd love to connect with anybody.
[00:59:59] Speaker A: Zach, thank you so much. You know, my biggest takeaway is brand protection isn't legal, busy work. It's financial discipline. It does matter. The goal isn't to spend more money. It's to get ahead of it. Spend less money in a smarter way that reduces the risk and protects the asset that you're already building every single day. For everyone watching. If your brand is part of how you make money, it needs to be part of how you protect your wealth. Because clarity creates leverage, and leverage creates options later on. My name is Alan Franks, and this is, frankly speaking,
