Naming new products or businesses can be a complicated process. The usual objective is to find a name that captures an essential quality or may elicit an emotional attachment in potential customers.
Much has been said about the importance of brand loyalty and having the right name certainly factors into that equation. After decades of brand awareness, it cannot have been an arbitrary decision when Hasbro removed the “Mr.” from its “Mr. Potato Head” line.
But a commonly overlooked issue in choosing a name is not having the right legal strategy. This presents risks that, like landmines, can later explode with catastrophic consequences that could preclude further use of the name and result in financial disaster.
Disconnect Between Marketing, Legal Departments
While start-ups and small businesses are particularly vulnerable to the legal risks endemic in adopting a new name, large corporations also fall victim to this challenge because of the disconnect between their marketing and legal departments.
Typically, the marketing department begins work on a new product name without prior input from legal. In many cases, the marketing department works with an outside naming company with fees that can run into millions of dollars.
The mistaken assumption is these names are available for use and they do not infringe on someone’s trademarks. Many naming companies tell the marketing department that the names they suggest are “pre-cleared” but are careful to disclaim any legal liability in their terms and conditions. What this means in practice is that the marketing department will choose a product name, often in collaboration with the executive in charge of the product being named and sometimes even the CEO, who then become invested in the product name.
As the launch date draws closer, someone may remember that the name should be cleared with legal, but this is considered a mere formality.
Screening the Name
At this point, the legal department will conduct a trademark clearance search (whether in-house or with the help of an outside law firm) in all the jurisdictions where the corporation plans to sell and market the product, which in some cases could be countries all across the globe.
A typical screening search can be conducted relatively quickly (within a day or two), but comprehensive searches can take much longer. Legal may advise a delay while it attempts to clear the name. This will likely face massive internal opposition, both from the marketing department and the business executives who may consider it a needless precaution.
But an even worse situation may arise if the screening searches reveal an existing trademark that conflicts with the chosen product name. This typically escalates the internal conflict surrounding the launch date and everything on which the name appears—from press releases and marketing materials to the packaging and product designs. It can be even more problematic when the conflicting trademark is similar but not identical to the product name, and there is some overlap in the respective products and services.
Legal will undoubtedly endeavor to explain the risks in adopting the new product name, but these risks are likely to be dismissed if inexperienced executives view legal as out of touch and an obstacle to the achievement of business goals.
It would be so easy to make the wrong decision when things are being weighed against such factors as commitments to retailers and projected earnings. The potential damages can range from financial to severely impacting the company’s relationships and reputation.
Do This Before Retaining Naming Company
The corporation can readily avoid these unfortunate scenarios by adopting a legal strategy as an integral part of its naming process. The marketing department should engage with legal from the very beginning of the process and before the retention of an outside naming company’s services. The naming company’s terms and conditions should be reviewed by a competent intellectual property lawyer who will explain to the corporation’s marketing and business executives that they cannot rely on the naming company for trademark clearance.
This allows executives to fully understand a naming company’s services and, therefore, will have an opportunity to negotiate its fee structure. After all, paying millions of dollars for a name that may not even be clear is not a sound business decision.
Next, marketing and legal should work out a strategy for trademark clearance. Key to this strategy is the establishment of a timetable for conducting clearance searches. Another important part of the strategy entails having back-up names to search and, most importantly, a dispassionate approach to naming that removes any attachment to a name that has yet to be cleared.
Integrating a legal strategy into every naming process avoids the landmine of trademark infringement litigation and will lead to a much smoother adoption and rollout of any new product and business names.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Alex Montagu is the founding partner of Montagu Law in New York. He practices intellectual property law, international commercial transactions, and new media commercial and corporate law. He started his career at Sullivan & Cromwell LLP, has served as general counsel for several companies, and is the author of “Intellectual Property: Money and Power in a New Era.”